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3 Small-Cap Biotech Stocks to Buy Now for Explosive Growth Potential

Hannah Perry | October 10, 2024

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3 Small-Cap Biotech Stocks to Buy for Major Upside

Investing in a Booming Sector

The biotech industry is witnessing robust growth fueled by increased investments, strong demand, and an energized IPO market. Recent Fed rate cuts have further enhanced the operational landscape, making it an optimal time for investors to consider solid small-cap biotech stocks like BioCryst Pharmaceuticals, Inc. (BCRX), Harmony Biosciences Holdings, Inc. (HRMY), and Entrada Therapeutics, Inc. (TRDA). As the sector continues rebounding in 2024—backed by pent-up demand, technological advancements, and a flourishing IPO environment—the smaller companies in this space have significant potential for high returns.

Market Dynamics

The biotech sector’s trajectory has been notably positive, with September recognized as one of the busiest months for healthcare IPOs, propelled by strong market debuts. Notably, innovative breakthroughs in oncology, immunology, and neurology are attracting more investments, suggesting a promising future for biotechs. According to Biopharma Dive, over 12 deals were reported during Q2, totaling 28 for the year, pointing to a thriving merger and acquisition environment. The recent decision by the Fed to cut rates for the first time in over four years is expected to ease funding for early-stage drugmakers and boost investments across the biotech landscape. Additionally, rising R&D initiatives and the adoption of digital technologies globally are poised to support the industry’s growth. Notably, a report by Precedence Research projects that the global biotechnology market will reach $4.61 trillion by 2034, growing at a CAGR of 11.5%.

Against this backdrop, small-cap biotech stocks offer significant prospects for long-term growth, presenting a cost-effective investment option with room for expansion. Let’s explore the fundamentals of three promising biotech stocks, starting from the third on our list.

Stock #3: BioCryst Pharmaceuticals, Inc. (BCRX)

BioCryst Pharmaceuticals is at the forefront of developing oral small-molecule and protein therapeutics aimed at treating rare diseases. The company produces peramivir injection—a neuraminidase inhibitor for acute uncomplicated influenza—under the brand names RAPIVAB, RAPIACTA, and PERAMIFLU. Additionally, it’s noted for its oral drug, ORLADEYO, used to manage hereditary angioedema.

Recently, a significant milestone for BCRX occurred when the U.S. Department of Health and Human Services awarded a contract valued at $69 million for the procurement of up to 95,625 doses of RAPIVAB over five years. In another positive development, the General Directorate of Medicines in Peru approved ORLADEYO, further cementing its market presence.

BCRX enjoyed a substantial revenue increase during the second quarter of 2024, posting a 32.5% rise year-over-year to $109.33 million. Its cash and cash equivalents as of June 30, 2024, amounted to $336.34 million, strengthening its financial position. Analysts project a further revenue increase of 31.3% for the third quarter, with expectations of reaching $113.89 million.

Shares of BCRX have surged 56.2% over the past six months and 17.1% over the past year, closing at $7.20. Wall Street estimates indicate a target of $15.33 in the coming year, offering a potential upside of 116.07%. The stock enjoys a solid B rating in POWR Ratings, with strong grades for Quality, Growth, and Value, placing it 21st among 331 biotech stocks.

Stock #2: Harmony Biosciences Holdings, Inc. (HRMY)

Harmony Biosciences specializes in developing and commercializing therapies for rare neurological diseases. Its flagship product, WAKIX (pitolisant), addresses excessive daytime sleepiness in adults with narcolepsy. A significant approval from the U.S. FDA for WAKIX® also extended its use to pediatric narcolepsy patients, marking it as the first FDA-approved non-scheduled treatment for this demographic.

In Q2 2024, Harmony reported a 28.8% increase in net product revenue, which reached $172.81 million. Its gross profit also saw a rise to $140.67 million, alongside a notable increase in non-GAAP adjusted net income. Looking ahead, analysts forecast a 15.3% increase in revenue for the third quarter to $184.81 million.

Over the past six months, HRMY shares have gained 16.5%, closing last at $34.75. Analysts project a price target of $52, indicating a potential upside of 49.38%. The stock is rated B overall in POWR Ratings, with an impressive A for Value, positioning it 14th among its industry peers.

Stock #1: Entrada Therapeutics, Inc. (TRDA)

Entrada Therapeutics is a clinical-stage company that focuses on developing therapies for neuromuscular diseases using its endosomal escape vehicle (EEV) platform. In a recent announcement, Entrada shared promising preliminary data from its Phase 1 clinical trial, highlighting the potential for its therapeutic candidates.

The second quarter of 2024 marked a dramatic 421.1% increase in collaboration revenue, amounting to $94.69 million. The company’s net income surged impressively compared to the previous year, and expectations for the current fiscal year show a predicted revenue increase of 36.3%.

TRDA’s stock has appreciated by 21.9% over the past six months, to close at $16.39. Analysts foresee a price target of $21.50, suggesting a 32.55% upside. The company holds a B rating in overall POWR Ratings, boasting A grades in both Value and Quality, placing it at 13th in the biotech industry rankings.

Conclusion

In summary, the biotech industry is positioned for significant growth, particularly within the small-cap segment. Investments in companies like BioCryst Pharmaceuticals, Harmony Biosciences, and Entrada Therapeutics could provide investors with substantial upside as they navigate an increasingly favorable market environment. Now is the time to delve into these opportunities, guided by solid fundamentals and promising market trends.